By Mark O’Hara, Enterprise Sales Manager and Right to Rent expert at ID-Pal
Fraud thrives in uncertainty and in the past two years, uncertainty has become the new normal. The world experienced an overnight move to operating online during the pandemic and there was an urgent need to still be able to do business remotely. To enable this the UK government set up supports for both individuals and businesses to survive the pandemic. After only a few months we found out the impact of these supports when critical processes were expedited and key due diligence checks were not in place.
Now we are seeing the full scale of the fraud committed during this time. Last year a
forecast by the Office for Budget Responsibility estimated the total cost of pandemic-related rescue measures to be £310bn.
It is evident political turmoil and global uncertainty are the ideal conditions for fraudsters to take advantage of and find weaknesses. When this perfect storm of volatile economic conditions caused by political unrest exists, fraud thrives. The global property market is not immune to the repercussions of this.
A sharp rise in mortgage interest rates in the UK over the past nine months has seen more people have to rent instead of buy or sell their property. Unpredictable rates made affordability more difficult when assessing wages versus repayments. Anyone looking to buy property in the past year have been faced with mortgage products that change overnight, leaving brokers and borrowers up in the air with their application process or worse, starting over again.
These rate hikes have in turn caused landlords to exit the market leading to a dwindling supply of stock to rent. Landlords who choose to stay in the market can also pass on the increases they face paying to renters. January data from the Office for National Statistics (ONS) showed private rental prices paid by tenants in the UK rose by 4.4% in the 12 months to January 2023, up from 4.2% in the 12 months to December 2022.
Letting agents and property managers should leverage digital solutions to manage this market uncertainty and ensure they are being compliant with Home Office guidelines on Right to Rent checks. These checks are a crucial stage of the Residential Tenancy Agreement. Letting agents are legally required to check the immigration status of all tenants, lodgers, and any other adults who will be living in a property. On the other side they also have a duty of care to tenants to ensure the property being rented belongs to their client. Failure to do so puts the agent at a huge risk of fines and reputational damage.
Home Office guidelines on how to conduct Right to Rent checks are however a work in progress and evolving every month. With so many changes to keep up with in the market, this is when mistakes easily occur. An inaccurate Right to Rent check can be costly too – up to five years in prison or an uncapped fine.
Using technology – such as a digital identity service provider (IDSP) – to streamline the rental application process and accurately verify an identity will help agents boost their operational efficiency, stop fraud at source and enable them to process more applications with better results. Plus, it provides overall peace of mind about satisfying Home Office requirements.
Fraud is happening on an industrial, organised, global scale in every industry, not just in financial services and it is as sophisticated in design as it is in scope. No industry is safe, no business is immune, and the mindset should be to prepare for it. Fraud is now the most commonly experienced crime in the UK according to the National Crime Agency (NCA) and in January 2023, the NCA even went so far as to reclassify fraud as a National Security Threat.
Pressure from inflation and high demand in the rental market make these ideal conditions for fraudulent actors to take advantage. Digital identity verification solutions can ensure automatic compliance with the Home Office guidelines around Right to Rent checks. Adopting these types of solutions means a meaningful change that is omnichannel, inclusive and fully embraces the capability of biometrics and technology to prevent fraud.
Digital identity verification is a process that uses technology to confirm the identity of an individual online, ensuring that they are who they claim to be, often used in financial transactions and rental agreements.
Fraud is an intentional deception made for personal gain or to damage another individual, often involving financial transactions or identity theft.
Right to Rent checks are legal requirements in the UK for landlords and letting agents to verify the immigration status of tenants before renting out a property.
Compliance in finance refers to the process of adhering to laws, regulations, and guidelines that govern financial practices and operations to prevent fraud and ensure integrity.
A rental market is the economic environment where properties are rented out to tenants, influenced by factors such as supply, demand, and rental prices.
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